What is a Loss of Value Policy and How do Athletes Collect on it?

Loss of value policies have long been around for college athletes who were afraid they may fall in the draft should they be injured during the season, but up until recently, a claim had yet to be filed.

Now, one player is suing a provider, alleging that it did not provide a payout after he tumbled in the draft due to injury. The latest developments in the loss of value insurance market beg the question – what exactly are these policies and how do they work?

What Marqise Lee can reveal about loss of value policies

A loss of value policy is typically filed by an athlete toward the end of his or her college tenure, as draft stock is rising. The policy will be for a given amount, often in the millions. For context, it is helpful to take a look at Marqise Lee’s policy and his subsequent lawsuit over the delayed payout. The $94,000 policy he paid for guaranteed any losses on a contract less than $9.6 million, according to Fox News. Early in the 2013 season, Lee – then a first round draft prospect – sprained his knee. He was eventually drafted by the Jacksonville Jaguars in the second round.

Lee signed a contract with the Jaguars for $5.1 million, far less than his insurance policy guaranteed him, so the player filed a claim stating the provider, Lloyd’s of London, owed him $4.5 million, the news source noted. In March 2015, the player filed a lawsuit against the firm, explaining that Lloyd’s of London had dragged its feet on payment for nine months. He claimed that his status as one of the top wide receivers in the nation was negatively affected by the knee injury he suffered, causing him to drop to the 39th pick in the draft – making him the sixth wide receiver taken.

How to collect on a loss of value policy

Players have collected before on permanent disability policies, but never before has an athlete attempted to collect on a loss-of-value policy such as Lee’s, the Orange County Register explained. Now, the burden of proof will be placed on the wide receiver to show the court that he was indeed slighted in the draft due to his knee injury and nothing else. To show that an injury caused a tumble in the draft, the first step for any athlete is to go back to the mock drafts issued prior to the event. Insurers typically utilize a few select mock drafts to determine their expected draft position, though which ones they use aren’t easily revealed.

An additional requirement in proving an injury was the root cause of a draft tumble is official documentation explaining the severity of the injury. If the drop in the draft is determined by an arbiter to the the result of injury, then the insurance policy provider will be required to pay out. However, if it is determined that a fall such as Lee’s was the result of off-the-field issues, a simple production slump or something similar rather than injury, then the provider will not have to pay.

The other possibility is that a player purchases a loss of value policy, does not suffer an injury and is drafted right where expected. In this case, the individual should have enough to pay off the premium and continue with a hopefully long and productive playing career.

Loss of value claims are getting their first real test in courts with the Lee case. The outcome will set a precedent for future players with policies whose injuries cause a draft board tumble.

If you feel you may need to file a claim for loss of value, consult an attorney first.